Currency traders catch up to the US economic strength – Sterling tanks

A big night if you were long Sterling as the weak CPI and PPI data (see below) hit longs right between the eyes taking GBP down more than 100 points from the highs.

On the dailies you might be able to argue that GBP’s sell off is a little overdone even though it has just had a range break. But on a weekly time frame it looks like further downside will open up in time.

Now of course Sterling is just one of a raft of global assets traders can trade but with a 5 big figure sell off it highlights the risk in extrapolating strength in markets to infinity.

Indeed while I know that I am still banging the drum about growing market instability even when we see stocks rally and Apple make a new all-time high for the first time in two years when I see stories where traders start bragging about how easy it is to buy the dip – well you know, maybe not all the time or next time.

Anyway at the close the Dow was up 81 points to 16,960 for a gain of 0.48%. The Nasdaq was 0.44% higher and the S&P rose 10 or 0.52% to 1,982.

Of note was the was the big surge in Housing starts surge to a 1,093,000 unit rate in July a 15.7% jump.

In Europe the big news was the 1.6% print in UK CPI which was below the 1.8% year on year total. This was after a 0.3% fall in CPI for the month and the associated fall in PPI. Sterling was hit hard and the FTSE rose 0.56% to 6,779. The DAX rose 0.96% to 9,334 while the CAC was 0.55% higher in Paris. In Milan stocks were very quiet while the IBEX 35 in Madrid rose 0.32%.

Locally the impact on the ASX 200 is muted it seems because of BHP specific features which have seen the Big Australian lose around 4% in overnight offshore trade. The SPI 200 futures as a result have bucked the offshore ebullience with the September contract down 8 points to 5574.

Asian stocks were universally positive yesterday with the Nikkei up 0.83%, the hang Seng up 0.67% while stocks in Shanghai rose 0.25%.

On currency markets the data in the US helped the US dollar hit its highest level in almost a year with Euro falling around 40 points from the high to 1.3321 while USDJPY surged back toward 103 sitting at the overnight high this morning of 102.92. The Aussie dollar was caught in the US dollar’s tractor beam falling 45 points off the high to 0.9301 this morning.

The Aussie is still in the range or box and its still expensive to short so it needs a big catalyst to tank.

On commodity markets September 62% Fe iron ore futures were down 0.08% to $92.25 while Newcastle coal for the same date fell 60 cents to $69.70.

The big news on commodities though was the big fall in Nymex crude which dipped 1.97% to $94.51 a barrel. Gold sits at $1,94 with silver at $19.43 an ounce. Copper remains at $3.10 a pound while the Ags had a better night with corn up 0.22% while wheat rose 0.87%. Soybeans however dipped 0.47%.

On the data front today RBA Governor Glenn Stevens addresses the the House of Representatives Standing Committee on Economics from 9.30 this morning. His opening statement will hit hte screens around that time and then he and his team will take questions after that.

day we get Japanese trade data and tonight we get PPI in Germany, the Bank of England minutes from their last meeting and the vote count which in the wake of last nights move in Sterling are doubly important for currency traders and then later on the FOMC minutes as well. And of course Jackson Hole is on.

Follow Us

Funding Methods

Risk Warning: Vantage FX Pty Ltd ACN 140 903 886 is not the issuer of the products or platforms described on this site. Rather,it is an Authorised Representative no: 343547 of Vantage Global Prime Pty Ltd ACN 157 768 566 AFSL 428901.Vantage Global Prime Pty Ltd is the issuer of the products and provider of the platform described on this site, and its PDSs are located here. Trading derivatives and forex carries a high level of risk to your capital and should only be traded with money you can afford to lose. Ensure you read the documents on our Legal Page (including FSG, PDSs and Terms & Conditions), and seek independent advice, to fully understand the risks,before deciding to trade. The information in this website is of a general nature only and the advice has been prepared without taking account of your objectives, financial situation or needs. Accordingly, before acting on the advice, you should consider the appropriateness of the advice having regard to your objectives, financial situation and needs, and after considering the PDSs.The information on this site and all matters relating to it are governed by and are to be construed according to the laws applicable in the State of New South Wales and the Commonwealth of Australia (Australian law). The website is for people located in Australia only and may not satisfy the laws of any other country.It should not be relied on by people in any country other than Australia. The information in this site is current at the date of publication but may be subject to change.

Forex Promotions

Open a live account today to gain exclusive access to our 8 Forex Promotions.